Written by Charleston Bankruptcy Lawyer, Russell A. DeMott
Whether you file Chapter 7 bankruptcy or Chapter 13 bankruptcy, the “automatic stay” goes into effect immediately when your case is filed. The stay prohibits almost all collection actions against you.
It’s a terrifying feeling not being able to answer your phone or dreading a trip to the mailbox. How many people pick up their phone expecting a neighbor, a relative, or a friend on the line only to be greeted by the cold unflinching voice of a bill collector? It’s like being a little kid in school getting called to the Principal’s office. The constant calls from demanding creditors are a big reason why so many people consider bankruptcy in the first place.
But will filing bankruptcy actually affect the seemingly never-ending onslaught of rings and overdue notices? The answer is a resounding “yes,” thanks to the Bankruptcy Code’s automatic stay.
The automatic stay prevents creditors from making any further attempts to collect property or money from the debtor. The stay is triggered once the bankruptcy is filed. It’s called “automatic” because it goes into effect immediately and without the need of being requested by the debtor.
Not only do the collection calls have to stop, but the creditors must stop all attempts to collect the debt. In fact, if the bill collectors do keep calling, they could find themselves sanctioned by the court for violating the automatic stay. The court may award the debtor damages, including attorneys’ fees. And if the violation is “willful,” the court may award “punitive damages,” which are damages awarded to punish the wrongdoing of the creditor and to deter future violations.
Of course, there are exceptions to every rule. Certain creditors are not stayed from collection efforts, most notably attempts to collect child support or alimony. Also, creditors may request “relief” from the stay in certain instances.
But for the vast majority of debtors, “silence is golden” once their petition is filed with the Bankruptcy Court.